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A bill to be entitled

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An act relating to the Florida Hurricane Catastrophe

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Fund; amending s. 215.555, F.S.; creating the Division

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of the Florida Hurricane Catastrophe Fund as a division

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of the State Board of Administration; providing for a

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board of the division; revising legislative findings;

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revising the definition of "retention," "covered

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policy," and "estimated claims-paying capacity" to

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account for the creation of the division; defining the

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terms "division," "director," "FHCF," "fund," and

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"board"; clarifying provisions requiring the State

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Board of Administration to invest certain funds;

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requiring that the board of the division appoint a

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director; providing duties of the director; providing

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that the appointment of a director is subject to the

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approval of the board by a majority vote; authorizing

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the division to employ or contract with such staff as

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the division deems necessary to administer the fund;

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requiring that the division enter into a contract with

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each insurer writing covered policies in this state to

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provide to the insurer reimbursement as prescribed by

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state law; requiring that such contracts contain

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certain elements or provisions and provide the division

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with certain obligations; requiring that the division

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publish certain information in the Florida

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Administrative Weekly at specified times; authorizing

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the payment of advancements of reimbursements or

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reimbursement premium to certain entities under certain

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conditions; requiring that the division inspect,

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examine, and verify the records of each insurer's

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covered policies at such times as the division deems

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appropriate and according to standards established by

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rule for the specific purpose of validating the

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accuracy of exposures and losses required to be

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reported under the terms and conditions of the

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reimbursement contract; providing for the payments of

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expenses associated with such inspection, examination,

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or verification; providing for the reimbursement of the

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division for such expenses by an insurer under certain

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circumstances; authorizing the division to take certain

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action if it finds any insurer's records or other

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necessary information to be inadequate or inadequately

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posted, recorded, or maintained; requiring that the

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division select an independent consultant to develop a

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formula for determining the actuarially indicated

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premium to be paid to the fund; requiring that the

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division consider certain factors when a establishing

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reimbursement premium; providing for the calculation of

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such premium by the division; providing for the payment

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of reimbursement premium; providing for the collection

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of interest on certain late reimbursement premium

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payments; providing responsibilities of the division if

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Citizens Property Insurance Corporation assumes or

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otherwise provides coverage for policies of an insurer

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placed in liquidation; authorizing the division to

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execute agreements regarding revenue bonds or other

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financing arrangements for the purpose of evidencing,

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securing, preserving, or protecting a pledge of revenue

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by the corporation; requiring that the Florida Surplus

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Lines Service Office assist the division in ensuring

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the accurate and timely collection and remittance of

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assessments of surplus lines premiums; requiring that

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the office report certain information to the division

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at a time and in a manner prescribed by the division;

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providing for the issuance of revenue bonds through

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counties or municipalities; revising the membership of

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the Florida Hurricane Catastrophe Fund Finance

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Corporation; providing that there is no liability on

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the part of any member of the board of directors or

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employees of the corporation for any actions taken by

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them in the performance of their duties; providing

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additional powers and duties of the board of the

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division and the division; requiring that the board of

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the division appoint an advisory council; providing for

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membership of the council; providing duties of the

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council; authorizing the division to take any action

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necessary to enforce certain rules and provisions of a

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reimbursement contract; requiring that the division

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make certain recommendations to the Legislature upon

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the creation of a federal or multistate catastrophic

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insurance or reinsurance program intended to serve

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purposes similar to the purposes of the fund; providing

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for the reversion of fund assets upon termination of

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the fund; providing for optional coverages of the fund;

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revising the temporary increases in coverage limits

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(TICL); requiring that a TICL addendum contain a

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promise by the division to make certain reimbursements

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to the TICL insurer; including the level of TICL

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coverage specified by the board among the factors that

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must be considered when determining the amount of

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increase in the claims-paying capacity of the fund;

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amending s. 215.557, F.S.; conforming provisions to

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changes made by the act; amending s. 215.5586, F.S.;

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requiring that the director of the division serve on

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the advisory council of the My Safe Florida Home

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Program; amending s. 215.559, F.S., relating to the

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Hurricane Loss Mitigation Program; conforming a cross-

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reference; amending s. 215.5595, F.S., relating to the

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Insurance Capital Build-up Incentive Program;

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conforming provisions to changes made by the act;

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revising the definition of "board" to conform to

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changes made by the act; amending s. 627.0628, F.S.;

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revising legislative intent; assigning the Florida

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Commission on Hurricane Loss Projection Methodology to

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the division; requiring that the director of the fund

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serve on the commission; requiring that the board of

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the division annually appoint one of the members of the

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commission to serve as chair; requiring that the

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division provide for travel, expenses, and staff

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support for the commission; indemnifying members and

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employees of the division from liability for action

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taken with respect to the commission or its activities;

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requiring that the division employ certain methods,

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principles, standards, models, or output ranges when

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establishing reimbursement premiums for the fund;

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providing an effective date.

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Be It Enacted by the Legislature of the State of Florida:

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     Section 1.  Section 215.555, Florida Statutes, is amended to

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read:

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     215.555  Florida Hurricane Catastrophe Fund.--

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     (1)  FINDINGS AND PURPOSE.--The Legislature finds and

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declares as follows:

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     (a)  There is a compelling state interest in maintaining a

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viable and orderly private sector market for property insurance

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in this state. To the extent that the private sector is unable to

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maintain a viable and orderly market for property insurance in

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this state, state actions to maintain such a viable and orderly

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market are valid and necessary exercises of the police power.

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     (b)  As a result of unprecedented levels of catastrophic

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insured losses in recent years, and especially as a result of

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Hurricane Andrew, numerous insurers have determined that in order

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to protect their solvency, it is necessary for them to reduce

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their exposure to hurricane losses. Also as a result of these

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events, world reinsurance capacity has significantly contracted,

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increasing the pressure on insurers to reduce their catastrophic

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exposures.

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     (c)  Mortgages require reliable property insurance, and the

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unavailability of reliable property insurance would therefore

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make most real estate transactions impossible. In addition, the

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public health, safety, and welfare demand that structures damaged

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or destroyed in a catastrophe be repaired or reconstructed as

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soon as possible. Therefore, the inability of the private sector

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insurance and reinsurance markets to maintain sufficient capacity

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to enable residents of this state to obtain property insurance

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coverage in the private sector endangers the economy of the state

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and endangers the public health, safety, and welfare.

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Accordingly, state action to correct for this inability of the

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private sector constitutes a valid and necessary public and

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governmental purpose.

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     (d)  The insolvencies and financial impairments resulting

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from Hurricane Andrew demonstrate that many property insurers are

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unable or unwilling to maintain reserves, surplus, and

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reinsurance sufficient to enable the insurers to pay all claims

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in full in the event of a catastrophe. State action is therefore

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necessary to protect the public from an insurer's unwillingness

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or inability to maintain sufficient reserves, surplus, and

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reinsurance.

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     (e)  A state program to provide a stable and ongoing source

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of reimbursement to insurers for a portion of their catastrophic

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hurricane losses will create additional insurance capacity

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sufficient to ameliorate the current dangers to the state's

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economy and to the public health, safety, and welfare.

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     (f)  It is essential to the functioning of a state program

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to increase insurance capacity that revenues received be exempt

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from federal taxation. It is therefore the intent of the

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Legislature that this program be structured as a state trust fund

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under the direction and control of the Division of the Florida

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Hurricane Catastrophe Fund within the State Board of

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Administration and operate exclusively for the purpose of

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protecting and advancing the state's interest in maintaining

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insurance capacity in this state.

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     (g)  Hurricane Andrew, which caused insured and uninsured

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losses in excess of $20 billion, will likely not be the last

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major windstorm to strike Florida. Recognizing that a future wind

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catastrophe could cause damages in excess of $60 billion,

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especially if a major urban area or series of urban areas were

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hit, it is the intent of the Legislature to balance equitably its

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concerns about mitigation of hurricane impact, insurance

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affordability and availability, and the risk of insurer and joint

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underwriting association insolvency, as well as assessment and

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bonding limitations.

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     (2)  DEFINITIONS.--As used in this section:

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     (a)  "Actuarially indicated" means, with respect to premiums

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paid by insurers for reimbursement provided by the fund, an

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amount determined according to principles of actuarial science to

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be adequate, but not excessive, in the aggregate, to pay current

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and future obligations and expenses of the fund, including

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additional amounts if needed to pay debt service on revenue bonds

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issued under this section and to provide required debt service

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coverage in excess of the amounts required to pay actual debt

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service on revenue bonds issued under subsection (7) (6), and

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determined according to principles of actuarial science to

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reflect each insurer's relative exposure to hurricane losses.

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     (b)  "Covered event" means any one storm declared to be a

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hurricane by the National Hurricane Center, which storm causes

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insured losses in this state.

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     (c)  "Covered policy" means any insurance policy covering

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residential property in this state, including, but not limited

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to, any homeowner's, mobile home owner's, farm owner's,

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condominium association, condominium unit owner's, tenant's, or

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apartment building policy, or any other policy covering a

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residential structure or its contents issued by any authorized

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insurer, including a commercial self-insurance fund holding a

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certificate of authority issued by the Office of Insurance

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Regulation under s. 624.462, the Citizens Property Insurance

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Corporation, and any joint underwriting association or similar

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entity created under law. The term "covered policy" includes any

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collateral protection insurance policy covering personal

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residences which protects both the borrower's and the lender's

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financial interests, in an amount at least equal to the coverage

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for the dwelling in place under the lapsed homeowner's policy, if

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such policy can be accurately reported as required in subsection

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(6) (5). Additionally, covered policies include policies covering

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the peril of wind removed from the Florida Residential Property

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and Casualty Joint Underwriting Association or from the Citizens

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Property Insurance Corporation, created under s. 627.351(6), or

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from the Florida Windstorm Underwriting Association, created

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under s. 627.351(2), by an authorized insurer under the terms and

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conditions of an executed assumption agreement between the

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authorized insurer and such association or Citizens Property

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Insurance Corporation. Each assumption agreement between the

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association and such authorized insurer or Citizens Property

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Insurance Corporation must be approved by the Office of Insurance

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Regulation before the effective date of the assumption, and the

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Office of Insurance Regulation must provide written notification

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to the division board within 15 working days after such approval.

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"Covered policy" does not include any policy that excludes wind

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coverage or hurricane coverage or any reinsurance agreement and

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does not include any policy otherwise meeting this definition

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which is issued by a surplus lines insurer or a reinsurer. All

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commercial residential excess policies and all deductible buy-

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back policies that, based on sound actuarial principles, require

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individual ratemaking shall be excluded by rule if the actuarial

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soundness of the fund is not jeopardized. For this purpose, the

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term "excess policy" means a policy that provides insurance

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protection for large commercial property risks and that provides

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a layer of coverage above a primary layer insured by another

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insurer.

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     (d)  "Losses" means direct incurred losses under covered

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policies, which shall include losses for additional living

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expenses not to exceed 40 percent of the insured value of a

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residential structure or its contents and shall exclude loss

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adjustment expenses. "Losses" does not include losses for fair

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rental value, loss of rent or rental income, or business

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interruption losses.

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     (e)  "Retention" means the amount of losses below which an

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insurer is not entitled to reimbursement from the fund. An

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insurer's retention shall be calculated as follows:

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     1. The division board shall calculate and report to each

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insurer the retention multiples for that year. For the contract

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year beginning June 1, 2005, the retention multiple shall be

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equal to $4.5 billion divided by the total estimated

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reimbursement premium for the contract year; for subsequent

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years, the retention multiple shall be equal to $4.5 billion,

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adjusted based upon the reported exposure from the prior contract

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year to reflect the percentage growth in exposure to the fund for

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covered policies since 2004, divided by the total estimated

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reimbursement premium for the contract year. Total reimbursement

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premium for purposes of the calculation under this subparagraph

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shall be estimated using the assumption that all insurers have

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selected the 90-percent coverage level.

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     2.  The retention multiple as determined under subparagraph

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1. shall be adjusted to reflect the coverage level elected by the

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insurer. For insurers electing the 90-percent coverage level, the

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adjusted retention multiple is 100 percent of the amount

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determined under subparagraph 1. For insurers electing the 75-

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percent coverage level, the retention multiple is 120 percent of

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the amount determined under subparagraph 1. For insurers electing

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the 45-percent coverage level, the adjusted retention multiple is

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200 percent of the amount determined under subparagraph 1.

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     3.  An insurer shall determine its provisional retention by

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multiplying its provisional reimbursement premium by the

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applicable adjusted retention multiple and shall determine its

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actual retention by multiplying its actual reimbursement premium

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by the applicable adjusted retention multiple.

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     4.  For insurers who experience multiple covered events

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causing loss during the contract year, beginning June 1, 2005,

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each insurer's full retention shall be applied to each of the

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covered events causing the two largest losses for that insurer.

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For each other covered event resulting in losses, the insurer's

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retention shall be reduced to one-third of the full retention.

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The reimbursement contract shall provide for the reimbursement of

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losses for each covered event based on the full retention with

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adjustments made to reflect the reduced retentions after January

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1 of the contract year provided the insurer reports its losses as

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specified in the reimbursement contract.

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     (f)  "Workers' compensation" includes both workers'

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compensation and excess workers' compensation insurance.

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     (g)  "Bond" means any bond, debenture, note, or other

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evidence of financial indebtedness issued under this section.

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     (h)  "Debt service" means the amount required in any fiscal

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year to pay the principal of, redemption premium, if any, and

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interest on revenue bonds and any amounts required by the terms

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of documents authorizing, securing, or providing liquidity for

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revenue bonds necessary to maintain in effect any such liquidity

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or security arrangements.

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     (i)  "Debt service coverage" means the amount, if any,

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required by the documents under which revenue bonds are issued,

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which amount is to be received in any fiscal year in excess of

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the amount required to pay debt service for such fiscal year.

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     (j)  "Local government" means a unit of general purpose

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local government as defined in s. 218.31(2).

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     (k)  "Pledged revenues" means all or any portion of revenues

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to be derived from reimbursement premiums under subsection (6)

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(5) or from emergency assessments under paragraph (7)(b) (6)(b),

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as determined by the board.

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     (l)  "Estimated claims-paying capacity" means the sum of the

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projected year-end balance of the fund as of December 31 of a

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contract year, plus any reinsurance purchased by the fund, plus

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the division's board's estimate of the board's borrowing

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capacity.

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     (m)  "Actual claims-paying capacity" means the sum of the

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balance of the fund as of December 31 of a contract year, plus

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any reinsurance purchased by the fund, plus the amount the board

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is able to raise through the issuance of revenue bonds under

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subsection (7) (6).

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     (n)  "Corporation" means the Florida Hurricane Catastrophe

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Fund Finance Corporation created in paragraph (7)(d) (6)(d).

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     (o) "Division" means the Division of the Florida Hurricane

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Catastrophe Fund.

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     (p) "Director" means the chief administrator of the

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division, who shall act on behalf of the division as authorized

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by the board.

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     (q) "FHCF" or "fund" means the Florida Hurricane

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Catastrophe Fund.

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     (r) "Board" means the governing board of the division,

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which shall be composed of the Governor and the Cabinet. The

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Governor shall serve as chair of the board, the Attorney General

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shall serve as secretary of the board, and the Chief Financial

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Officer shall serve as treasurer of the board.

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     (3) DIVISION OF THE FLORIDA HURRICANE CATASTROPHE FUND

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CREATED.--There is created a division of the State Board of

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Administration known as the Division of the Florida Hurricane

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Catastrophe Fund, which shall administer the Florida Hurricane

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Catastrophe Fund. For purposes of this section, the board of the

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division shall consist of the Governor and the Cabinet.

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     (4)(3) FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There

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is created the Florida Hurricane Catastrophe Fund within to be

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administered by the State Board of Administration. Moneys in the

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fund may not be expended, loaned, or appropriated except to pay

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obligations of the fund arising out of reimbursement contracts

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entered into under subsection (5) (4), payment of debt service on

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revenue bonds issued under subsection (7) (6), costs of the

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mitigation program under subsection (8) (7), costs of procuring

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reinsurance, and costs of administration of the fund. The State

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Board of Administration board shall invest the moneys in the fund

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pursuant to ss. 215.44-215.52. Except as otherwise provided in

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this section, earnings from all investments shall be retained in

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the fund. The board shall appoint a director who shall be

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responsible for the administration of the fund. The appointment

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of the director of the Division of the Florida Hurricane

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Catastrophe Fund shall be subject to the approval by a majority

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vote of the board. The division board may employ or contract with

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such staff and professionals as the division board deems

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necessary for the administration of the fund. The board may adopt

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such rules as are reasonable and necessary to implement this

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section and shall specify interest due on any delinquent

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remittances, which interest may not exceed the fund's rate of

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return plus 5 percent. Such rules must conform to the

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Legislature's specific intent in establishing the fund as

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expressed in subsection (1), must enhance the fund's potential

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ability to respond to claims for covered events, must contain

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general provisions so that the rules can be applied with

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reasonable flexibility so as to accommodate insurers in

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situations of an unusual nature or where undue hardship may

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result, except that such flexibility may not in any way impair,

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override, supersede, or constrain the public purpose of the fund,

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and must be consistent with sound insurance practices. The board

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may, by rule, provide for the exemption from subsections (5) (4)

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and (6) (5) of insurers writing covered policies with less than

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$10 million in aggregate exposure for covered policies if the

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exemption does not affect the actuarial soundness of the fund.

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The division shall have the power to sue and be sued in the name

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of the division.

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     (5)(4) REIMBURSEMENT CONTRACTS.--

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     (a) The division board shall enter into a contract with

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each insurer writing covered policies in this state to provide to

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the insurer the reimbursement described in paragraphs (b) and

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(d), in exchange for the reimbursement premium paid into the fund

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under subsection (6) (5). As a condition of doing business in

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this state, each such insurer shall enter into such a contract.

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     (b)1. The contract shall contain a promise by the division

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board to reimburse the insurer for 45 percent, 75 percent, or 90

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percent of its losses from each covered event in excess of the

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insurer's retention, plus 5 percent of the reimbursed losses to

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cover loss adjustment expenses.

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     2.  The insurer must elect one of the percentage coverage

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levels specified in this paragraph and may, upon renewal of a

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reimbursement contract, elect a lower percentage coverage level

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if no revenue bonds issued under subsection (7) (6) after a

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covered event are outstanding, or elect a higher percentage

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coverage level, regardless of whether or not revenue bonds are

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outstanding. All members of an insurer group must elect the same

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percentage coverage level. Any joint underwriting association,

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risk apportionment plan, or other entity created under s. 627.351

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must elect the 90-percent coverage level.

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     3.  The contract shall provide that reimbursement amounts

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shall not be reduced by reinsurance paid or payable to the

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insurer from other sources.

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     4.  Notwithstanding any other provision contained in this

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section, the board shall make available to insurers that

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purchased coverage provided by this subparagraph in 2006,

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insurers qualifying as limited apportionment companies under s.

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627.351(6)(c), and insurers that were approved to participate in

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2006 or that are approved in 2007 for the Insurance Capital

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Build-Up Incentive Program pursuant to s. 215.5595, a contract or

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contract addendum that provides an additional amount of

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reimbursement coverage of up to $10 million. The premium to be

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charged for this additional reimbursement coverage shall be 50

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percent of the additional reimbursement coverage provided, which

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shall include one prepaid reinstatement. The minimum retention

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level that an eligible participating insurer must retain

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associated with this additional coverage layer is 30 percent of

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the insurer's surplus as of December 31, 2006. This coverage

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shall be in addition to all other coverage that may be provided

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under this section. The coverage provided by the fund under this

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subparagraph shall be in addition to the claims-paying capacity

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as defined in subparagraph (c)1., but only with respect to those

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insurers that select the additional coverage option and meet the

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requirements of this subparagraph. The claims-paying capacity

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with respect to all other participating insurers and limited

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apportionment companies that do not select the additional

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coverage option shall be limited to their reimbursement premium's

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proportionate share of the actual claims-paying capacity

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otherwise defined in subparagraph (c)1. and as provided for under

428

the terms of the reimbursement contract. Coverage provided in the

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reimbursement contract will not be affected by the additional

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premiums paid by participating insurers exercising the additional

431

coverage option allowed in this subparagraph. This subparagraph

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expires on May 31, 2008.

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     (c)1.  The contract shall also provide that the obligation

434

of the division board with respect to all contracts covering a

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particular contract year shall not exceed the actual claims-

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paying capacity of the fund up to a limit of $15 billion for that

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contract year adjusted based upon the reported exposure from the

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prior contract year to reflect the percentage growth in exposure

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to the fund for covered policies since 2003, provided the dollar

440

growth in the limit may not increase in any year by an amount

441

greater than the dollar growth of the balance of the fund as of

442

December 31, less any premiums or interest attributable to

443

optional coverage, as defined by rule which occurred over the

444

prior calendar year.

445

     2.  In May before the start of the upcoming contract year

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and in October during the contract year, the division board shall

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publish in the Florida Administrative Weekly a statement of the

448

fund's estimated borrowing capacity and the projected balance of

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the fund as of December 31. After the end of each calendar year,

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the division board shall notify insurers of the estimated

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borrowing capacity and the balance of the fund as of December 31

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to provide insurers with data necessary to assist them in

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determining their retention and projected payout from the fund

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for loss reimbursement purposes. In conjunction with the

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development of the premium formula, as provided for in subsection

456

(6) (5), the division board shall publish factors or multiples

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that assist insurers in determining their retention and projected

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payout for the next contract year. For all regulatory and

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reinsurance purposes, an insurer may calculate its projected

460

payout from the fund as its share of the total fund premium for

461

the current contract year multiplied by the sum of the projected

462

balance of the fund as of December 31 and the estimated borrowing

463

capacity for that contract year as reported under this

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subparagraph.

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     (d)1.  For purposes of determining potential liability and

466

to aid in the sound administration of the fund, the contract

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shall require each insurer to report such insurer's losses from

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each covered event on an interim basis, as directed by the

469

division board. The contract shall require the insurer to report

470

to the division board no later than December 31 of each year, and

471

quarterly thereafter, its reimbursable losses from covered events

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for the year. The contract shall require the division board to

473

determine and pay, as soon as practicable after receiving these

474

reports of reimbursable losses, the initial amount of

475

reimbursement due and adjustments to this amount based on later

476

loss information. The adjustments to reimbursement amounts shall

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require the division board to pay, or the insurer to return,

478

amounts reflecting the most recent calculation of losses.

479

     2.  In determining reimbursements pursuant to this

480

subsection, the contract shall provide that the division board

481

shall pay to each insurer such insurer's projected payout, which

482

is the amount of reimbursement it is owed, up to an amount equal

483

to the insurer's share of the actual premium paid for that

484

contract year, multiplied by the actual claims-paying capacity

485

available for that contract year.

486

     (e)1.  Except as provided in subparagraphs 2. and 3., the

487

contract shall provide that if an insurer demonstrates to the

488

division board that it is likely to qualify for reimbursement

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under the contract, and demonstrates to the division board that

490

the immediate receipt of moneys from the division board is likely

491

to prevent the insurer from becoming insolvent, the division

492

board shall advance the insurer, at market interest rates, the

493

amounts necessary to maintain the solvency of the insurer, up to

494

50 percent of the division's board's estimate of the

495

reimbursement due the insurer. The insurer's reimbursement shall

496

be reduced by an amount equal to the amount of the advance and

497

interest thereon.

498

     2.  With respect only to an entity created under s. 627.351,

499

the contract shall also provide that the division board may, upon

500

application by such entity, advance to such entity, at market

501

interest rates, up to 90 percent of the lesser of:

502

     a. The division's board's estimate of the amount of

503

reimbursement due to such entity; or

504

     b.  The entity's share of the actual reimbursement premium

505

paid for that contract year, multiplied by the currently

506

available liquid assets of the fund. In order for the entity to

507

qualify for an advance under this subparagraph, the entity must

508

demonstrate to the division board that the advance is essential

509

to allow the entity to pay claims for a covered event and the

510

division board must determine that the fund's assets are

511

sufficient and are sufficiently liquid to allow the division

512

board to make an advance to the entity and still fulfill the

513

board's reimbursement obligations to other insurers. The entity's

514

final reimbursement for any contract year in which an advance has

515

been made under this subparagraph must be reduced by an amount

516

equal to the amount of the advance and any interest on such

517

advance. In order to determine what amounts, if any, are due the

518

entity, the division board may require the entity to report its

519

exposure and its losses at any time to determine retention levels

520

and reimbursements payable.

521

     3.  The contract shall also provide specifically and solely

522

with respect to any limited apportionment company under s.

523

627.351(2)(b)3. that the division board may, upon application by

524

such company, advance to such company the amount of the estimated

525

reimbursement payable to such company as calculated pursuant to

526

paragraph (d), at market interest rates, if the division board

527

determines that the fund's assets are sufficient and are

528

sufficiently liquid to permit the division board to make an

529

advance to such company and at the same time fulfill its

530

reimbursement obligations to the insurers that are participants

531

in the fund. Such company's final reimbursement for any contract

532

year in which an advance pursuant to this subparagraph has been

533

made shall be reduced by an amount equal to the amount of the

534

advance and interest thereon. In order to determine what amounts,

535

if any, are due to such company, the division board may require

536

such company to report its exposure and its losses at such times

537

as may be required to determine retention levels and loss

538

reimbursements payable.

539

     (f)  In order to ensure that insurers have properly reported

540

the insured values on which the reimbursement premium is based

541

and to ensure that insurers have properly reported the losses for

542

which reimbursements have been made, the division board shall

543

inspect, examine, and verify the records of each insurer's

544

covered policies at such times as the division board deems

545

appropriate and according to standards established by rule for

546

the specific purpose of validating the accuracy of exposures and

547

losses required to be reported under the terms and conditions of

548

the reimbursement contract. The costs of the examinations shall

549

be borne by the division board. However, in order to remove any

550

incentive for an insurer to delay preparations for an

551

examination, the division board shall be reimbursed by the

552

insurer for any examination expenses incurred in addition to the

553

usual and customary costs of the examination, which additional

554

expenses were incurred as a result of an insurer's failure,

555

despite proper notice, to be prepared for the examination or as a

556

result of an insurer's failure to provide requested information

557

while the examination is in progress. If the division board finds

558

any insurer's records or other necessary information to be

559

inadequate or inadequately posted, recorded, or maintained, the

560

division board may employ experts to reconstruct, rewrite,

561

record, post, or maintain such records or information, at the

562

expense of the insurer being examined, if such insurer has failed

563

to maintain, complete, or correct such records or deficiencies

564

after the division board has given the insurer notice and a

565

reasonable opportunity to do so. Any information contained in an

566

examination report, which information is described in s. 215.557,

567

is confidential and exempt from the provisions of s. 119.07(1)

568

and s. 24(a), Art. I of the State Constitution, as provided in s.

569

215.557. Nothing in this paragraph expands the exemption in s.

570

215.557.

571

     (g)  The contract shall provide that in the event of the

572

insolvency of an insurer, the fund shall pay directly to the

573

Florida Insurance Guaranty Association for the benefit of Florida

574

policyholders of the insurer the net amount of all reimbursement

575

moneys owed to the insurer. As used in this paragraph, the term

576

"net amount of all reimbursement moneys" means that amount which

577

remains after reimbursement for:

578

     1.  Preliminary or duplicate payments owed to private

579

reinsurers or other inuring reinsurance payments to private

580

reinsurers that satisfy statutory or contractual obligations of

581

the insolvent insurer attributable to covered events to such

582

reinsurers; or

583

     2.  Funds owed to a bank or other financial institution to

584

cover obligations of the insolvent insurer under a credit

585

agreement that assists the insolvent insurer in paying claims

586

attributable to covered events.

587

588

The private reinsurers, banks, or other financial institutions

589

shall be reimbursed or otherwise paid prior to payment to the

590

Florida Insurance Guaranty Association, notwithstanding any law

591

to the contrary. The guaranty association shall pay all claims up

592

to the maximum amount permitted by chapter 631; thereafter, any

593

remaining moneys shall be paid pro rata to claims not fully

594

satisfied. This paragraph does not apply to a joint underwriting

595

association, risk apportionment plan, or other entity created

596

under s. 627.351.

597

     (6)(5) REIMBURSEMENT PREMIUMS.--

598

     (a)  Each reimbursement contract shall require the insurer

599

to annually pay to the fund an actuarially indicated premium for

600

the reimbursement.

601

     (b) The division State Board of Administration shall select

602

an independent consultant to develop a formula for determining

603

the actuarially indicated premium to be paid to the fund. The

604

formula shall specify, for each zip code or other limited

605

geographical area, the amount of premium to be paid by an insurer

606

for each $1,000 of insured value under covered policies in that

607

zip code or other area. In establishing premiums, the division

608

board shall consider the coverage elected under paragraph (5)(b)

609

(4)(b) and any factors that tend to enhance the actuarial

610

sophistication of ratemaking for the fund, including deductibles,

611

type of construction, type of coverage provided, relative

612

concentration of risks, and other such factors deemed by the

613

division board to be appropriate. The formula may provide for a

614

procedure to determine the premiums to be paid by new insurers

615

that begin writing covered policies after the beginning of a

616

contract year, taking into consideration when the insurer starts

617

writing covered policies, the potential exposure of the insurer,

618

the potential exposure of the fund, the administrative costs to

619

the insurer and to the fund, and any other factors deemed

620

appropriate by the board. The formula must be approved by

621

unanimous vote of the board. The board may, at any time, revise

622

the formula pursuant to the procedure provided in this paragraph.

623

     (c)  No later than September 1 of each year, each insurer

624

shall notify the division board of its insured values under

625

covered policies by zip code, as of June 30 of that year. On the

626

basis of these reports, the division board shall calculate the

627

premium due from the insurer, based on the formula adopted under

628

paragraph (b). The insurer shall pay the required annual premium

629

pursuant to a periodic payment plan specified in the contract.

630

The division board shall provide for payment of reimbursement

631

premium in periodic installments and for the adjustment of

632

provisional premium installments collected prior to submission of

633

the exposure report to reflect data in the exposure report. The

634

division board shall collect interest on late reimbursement

635

premium payments consistent with the assumptions made in

636

developing the premium formula in accordance with paragraph (b).

637

     (d)  All premiums paid to the fund under reimbursement

638

contracts shall be treated as premium for approved reinsurance

639

for all accounting and regulatory purposes.

640

     (e)  If Citizens Property Insurance Corporation assumes or

641

otherwise provides coverage for policies of an insurer placed in

642

liquidation under chapter 631 pursuant to s. 627.351(6), the

643

corporation may, pursuant to conditions mutually agreed to

644

between the corporation and the division State Board of

645

Administration, obtain coverage for such policies under its

646

contract with the fund or accept an assignment of the liquidated

647

insurer's contract with the fund. If Citizens Property Insurance

648

Corporation elects to cover these policies under the

649

corporation's contract with the division fund, it shall notify

650

the division board of its insured values with respect to such

651

policies within a specified time mutually agreed to between the

652

corporation and the division board, after such assumption or

653

other coverage transaction, and the division fund shall treat

654

such policies as having been in effect as of June 30 of that

655

year. In the event of an assignment, the fund shall apply that

656

contract to such policies and treat Citizens Property Insurance

657

Corporation as if the corporation were the liquidated insurer for

658

the remaining term of the contract, and the corporation shall

659

have all rights and duties of the liquidated insurer beginning on

660

the date it provides coverage for such policies, but the

661

corporation is not subject to any preexisting rights,

662

liabilities, or duties of the liquidated insurer. The assignment,

663

including any unresolved issues between the liquidated insurer

664

and Citizens Property Insurance Corporation under the contract,

665

shall be provided for in the liquidation order or otherwise

666

determined by the court. However, if a covered event occurs

667

before the effective date of the assignment, the corporation may

668

not obtain coverage for such policies under its contract with the

669

fund and shall accept an assignment of the liquidated insurer's

670

contract as provided in this paragraph.

671

     (7)(6) REVENUE BONDS.--

672

     (a)  General provisions.--

673

     1.  Upon the occurrence of a hurricane and a determination

674

that the moneys in the fund are or will be insufficient to pay

675

reimbursement at the levels promised in the reimbursement

676

contracts, the board may take the necessary steps under paragraph

677

(c) or paragraph (d) for the issuance of revenue bonds for the

678

benefit of the fund. The proceeds of such revenue bonds may be

679

used to make reimbursement payments under reimbursement

680

contracts; to refinance or replace previously existing borrowings

681

or financial arrangements; to pay interest on bonds; to fund

682

reserves for the bonds; to pay expenses incident to the issuance

683

or sale of any bond issued under this section, including costs of

684

validating, printing, and delivering the bonds, costs of printing

685

the official statement, costs of publishing notices of sale of

686

the bonds, and related administrative expenses; or for such other

687

purposes related to the financial obligations of the fund as the

688

board may determine. The term of the bonds may not exceed 30

689

years. The board may pledge or authorize the corporation to

690

pledge all or a portion of all revenues under subsection (6) (5)

691

and under paragraph (b) to secure such revenue bonds and the

692

division board may execute such agreements between the division

693

board and the issuer of any revenue bonds and providers of other

694

financing arrangements under paragraph (8)(b) (7)(b) as the

695

division board deems necessary to evidence, secure, preserve, and

696

protect such pledge. If reimbursement premiums received under

697

subsection (6) (5) or earnings on such premiums are used to pay

698

debt service on revenue bonds, such premiums and earnings shall

699

be used only after the use of the moneys derived from assessments

700

under paragraph (b). The funds, credit, property, or taxing power

701

of the state or political subdivisions of the state shall not be

702

pledged for the payment of such bonds. The division board may

703

also enter into agreements under paragraph (c) or paragraph (d)

704

for the purpose of issuing revenue bonds in the absence of a

705

hurricane upon a determination that such action would maximize

706

the ability of the fund to meet future obligations.

707

     2.  The Legislature finds and declares that the issuance of

708

bonds under this subsection is for the public purpose of paying

709

the proceeds of the bonds to insurers, thereby enabling insurers

710

to pay the claims of policyholders to assure that policyholders

711

are able to pay the cost of construction, reconstruction, repair,

712

restoration, and other costs associated with damage to property

713

of policyholders of covered policies after the occurrence of a

714

hurricane.

715

     (b)  Emergency assessments.--

716

     1.  If the board determines that the amount of revenue

717

produced under subsection (6) (5) is insufficient to fund the

718

obligations, costs, and expenses of the fund and the corporation,

719

including repayment of revenue bonds and that portion of the debt

720

service coverage not met by reimbursement premiums, the board

721

shall direct the Office of Insurance Regulation to levy, by

722

order, an emergency assessment on direct premiums for all

723

property and casualty lines of business in this state, including

724

property and casualty business of surplus lines insurers

725

regulated under part VIII of chapter 626, but not including any

726

workers' compensation premiums or medical malpractice premiums.

727

As used in this subsection, the term "property and casualty

728

business" includes all lines of business identified on Form 2,

729

Exhibit of Premiums and Losses, in the annual statement required

730

of authorized insurers by s. 624.424 and any rule adopted under

731

this section, except for those lines identified as accident and

732

health insurance and except for policies written under the

733

National Flood Insurance Program. The assessment shall be

734

specified as a percentage of direct written premium and is

735

subject to annual adjustments by the board in order to meet debt

736

obligations. The same percentage shall apply to all policies in

737

lines of business subject to the assessment issued or renewed

738

during the 12-month period beginning on the effective date of the

739

assessment.

740

     2.  A premium is not subject to an annual assessment under

741

this paragraph in excess of 6 percent of premium with respect to

742

obligations arising out of losses attributable to any one

743

contract year, and a premium is not subject to an aggregate

744

annual assessment under this paragraph in excess of 10 percent of

745

premium. An annual assessment under this paragraph shall continue

746

as long as the revenue bonds issued with respect to which the

747

assessment was imposed are outstanding, including any bonds the

748

proceeds of which were used to refund the revenue bonds, unless

749

adequate provision has been made for the payment of the bonds

750

under the documents authorizing issuance of the bonds.

751

     3.  Emergency assessments shall be collected from

752

policyholders. Emergency assessments shall be remitted by

753

insurers as a percentage of direct written premium for the

754

preceding calendar quarter as specified in the order from the

755

Office of Insurance Regulation. The office shall verify the

756

accurate and timely collection and remittance of emergency

757

assessments and shall report the information to the division

758

board in a form and at a time specified by the division board.

759

Each insurer collecting assessments shall provide the information

760

with respect to premiums and collections as may be required by

761

the office to enable the office to monitor and verify compliance

762

with this paragraph.

763

     4.  With respect to assessments of surplus lines premiums,

764

each surplus lines agent shall collect the assessment at the same

765

time as the agent collects the surplus lines tax required by s.

766

626.932, and the surplus lines agent shall remit the assessment

767

to the Florida Surplus Lines Service Office created by s. 626.921

768

at the same time as the agent remits the surplus lines tax to the

769

Florida Surplus Lines Service Office. The emergency assessment on

770

each insured procuring coverage and filing under s. 626.938 shall

771

be remitted by the insured to the Florida Surplus Lines Service

772

Office at the time the insured pays the surplus lines tax to the

773

Florida Surplus Lines Service Office. The Florida Surplus Lines

774

Service Office shall remit the collected assessments to the fund

775

or corporation as provided in the order levied by the Office of

776

Insurance Regulation. The Florida Surplus Lines Service Office

777

shall verify the proper application of such emergency assessments

778

and shall assist the division board in ensuring the accurate and

779

timely collection and remittance of assessments as required by

780

the board. The Florida Surplus Lines Service Office shall

781

annually calculate the aggregate written premium on property and

782

casualty business, other than workers' compensation and medical

783

malpractice, procured through surplus lines agents and insureds

784

procuring coverage and filing under s. 626.938 and shall report

785

the information to the division board in a form and at a time

786

specified by the division board.

787

     5.  Any assessment authority not used for a particular

788

contract year may be used for a subsequent contract year. If, for

789

a subsequent contract year, the board determines that the amount

790

of revenue produced under subsection (6) (5) is insufficient to

791

fund the obligations, costs, and expenses of the fund and the

792

corporation, including repayment of revenue bonds and that

793

portion of the debt service coverage not met by reimbursement

794

premiums, the board shall direct the Office of Insurance

795

Regulation to levy an emergency assessment up to an amount not

796

exceeding the amount of unused assessment authority from a

797

previous contract year or years, plus an additional 4 percent

798

provided that the assessments in the aggregate do not exceed the

799

limits specified in subparagraph 2.

800

     6.  The assessments otherwise payable to the corporation

801

under this paragraph shall be paid to the fund unless and until

802

the Office of Insurance Regulation and the Florida Surplus Lines

803

Service Office have received from the corporation and the fund a

804

notice, which shall be conclusive and upon which they may rely

805

without further inquiry, that the corporation has issued bonds

806

and the fund has no agreements in effect with local governments

807

under paragraph (c). On or after the date of the notice and until

808

the date the corporation has no bonds outstanding, the fund shall

809

have no right, title, or interest in or to the assessments,

810

except as provided in the fund's agreement with the corporation.

811

     7.  Emergency assessments are not premium and are not

812

subject to the premium tax, to the surplus lines tax, to any

813

fees, or to any commissions. An insurer is liable for all

814

assessments that it collects and must treat the failure of an

815

insured to pay an assessment as a failure to pay the premium. An

816

insurer is not liable for uncollectible assessments.

817

     8.  When an insurer is required to return an unearned

818

premium, it shall also return any collected assessment

819

attributable to the unearned premium. A credit adjustment to the

820

collected assessment may be made by the insurer with regard to

821

future remittances that are payable to the fund or corporation,

822

but the insurer is not entitled to a refund.

823

     9.  When a surplus lines insured or an insured who has

824

procured coverage and filed under s. 626.938 is entitled to the

825

return of an unearned premium, the Florida Surplus Lines Service

826

Office shall provide a credit or refund to the agent or such

827

insured for the collected assessment attributable to the unearned

828

premium prior to remitting the emergency assessment collected to

829

the fund or corporation.

830

     10.  The exemption of medical malpractice insurance premiums

831

from emergency assessments under this paragraph is repealed May

832

31, 2010, and medical malpractice insurance premiums shall be

833

subject to emergency assessments attributable to loss events

834

occurring in the contract years commencing on June 1, 2010.

835

     (c)  Revenue bond issuance through counties or

836

municipalities.--

837

     1.  If the board elects to enter into agreements with local

838

governments for the issuance of revenue bonds for the benefit of

839

the fund, the division board shall enter into such contracts with

840

one or more local governments, including agreements providing for

841

the pledge of revenues, as are necessary to effect such issuance.

842

The governing body of a county or municipality is authorized to

843

issue bonds as defined in s. 125.013 or s. 166.101 from time to

844

time to fund an assistance program, in conjunction with the

845

Florida Hurricane Catastrophe Fund, for the purposes set forth in

846

this section or for the purpose of paying the costs of

847

construction, reconstruction, repair, restoration, and other

848

costs associated with damage to properties of policyholders of

849

covered policies due to the occurrence of a hurricane by assuring

850

that policyholders located in this state are able to recover

851

claims under property insurance policies after a covered event.

852

     2.  In order to avoid needless and indiscriminate

853

proliferation, duplication, and fragmentation of such assistance

854

programs, any local government may provide for the payment of

855

fund reimbursements, regardless of whether or not the losses for

856

which reimbursement is made occurred within or outside of the

857

territorial jurisdiction of the local government.

858

     3.  The state hereby covenants with holders of bonds issued

859

under this paragraph that the state will not repeal or abrogate

860

the power of the board to direct the Office of Insurance

861

Regulation to levy the assessments and to collect the proceeds of

862

the revenues pledged to the payment of such bonds as long as any

863

such bonds remain outstanding unless adequate provision has been

864

made for the payment of such bonds pursuant to the documents

865

authorizing the issuance of such bonds.

866

     4.  There shall be no liability on the part of, and no cause

867

of action shall arise against any members or employees of the

868

governing body of a local government for any actions taken by

869

them in the performance of their duties under this paragraph.

870

     (d)  Florida Hurricane Catastrophe Fund Finance

871

Corporation.--

872

     1.  In addition to the findings and declarations in

873

subsection (1), the Legislature also finds and declares that:

874

     a.  The public benefits corporation created under this

875

paragraph will provide a mechanism necessary for the cost-

876

effective and efficient issuance of bonds. This mechanism will

877

eliminate unnecessary costs in the bond issuance process, thereby

878

increasing the amounts available to pay reimbursement for losses

879

to property sustained as a result of hurricane damage.

880

     b.  The purpose of such bonds is to fund reimbursements

881

through the Florida Hurricane Catastrophe Fund to pay for the

882

costs of construction, reconstruction, repair, restoration, and

883

other costs associated with damage to properties of policyholders

884

of covered policies due to the occurrence of a hurricane.

885

     c.  The efficacy of the financing mechanism will be enhanced

886

by the corporation's ownership of the assessments, by the

887

insulation of the assessments from possible bankruptcy

888

proceedings, and by covenants of the state with the corporation's

889

bondholders.

890

     2.a.  There is created a public benefits corporation, which

891

is an instrumentality of the state, to be known as the Florida

892

Hurricane Catastrophe Fund Finance Corporation.

893

     b. The corporation shall operate under a six-member five-

894

member board of directors consisting of the Governor or a

895

designee, the Chief Financial Officer or a designee, the Attorney

896

General or a designee, the Commissioner of the Department of

897

Agriculture and Consumer Services or a designee, the director of

898

the Division of Bond Finance of the State Board of

899

Administration, and the director of the division senior employee

900

of the State Board of Administration responsible for operations

901

of the Florida Hurricane Catastrophe Fund of the State Board of

902

Administration.

903

     c.  The corporation has all of the powers of corporations

904

under chapter 607 and under chapter 617, subject only to the

905

provisions of this subsection.

906

     d.  The corporation may issue bonds and engage in such other

907

financial transactions as are necessary to provide sufficient

908

funds to achieve the purposes of this section.

909

     e.  The corporation may invest in any of the investments

910

authorized under s. 215.47.

911

     f.  There shall be no liability on the part of, and no cause

912

of action shall arise against, any member of the board of

913

directors members or employees of the corporation for any actions

914

taken by them in the performance of their duties under this

915

paragraph.

916

     3.a.  In actions under chapter 75 to validate any bonds

917

issued by the corporation, the notice required by s. 75.06 shall

918

be published only in Leon County and in two newspapers of general

919

circulation in the state, and the complaint and order of the

920

court shall be served only on the State Attorney of the Second

921

Judicial Circuit.

922

     b.  The state hereby covenants with holders of bonds of the

923

corporation that the state will not repeal or abrogate the power

924

of the board to direct the Office of Insurance Regulation to levy

925

the assessments and to collect the proceeds of the revenues

926

pledged to the payment of such bonds as long as any such bonds

927

remain outstanding unless adequate provision has been made for

928

the payment of such bonds pursuant to the documents authorizing

929

the issuance of such bonds.

930

     4.  The bonds of the corporation are not a debt of the state

931

or of any political subdivision, and neither the state nor any

932

political subdivision is liable on such bonds. The corporation

933

does not have the power to pledge the credit, the revenues, or

934

the taxing power of the state or of any political subdivision.

935

The credit, revenues, or taxing power of the state or of any

936

political subdivision shall not be deemed to be pledged to the

937

payment of any bonds of the corporation.

938

     5.a.  The property, revenues, and other assets of the

939

corporation; the transactions and operations of the corporation

940

and the income from such transactions and operations; and all

941

bonds issued under this paragraph and interest on such bonds are

942

exempt from taxation by the state and any political subdivision,

943

including the intangibles tax under chapter 199 and the income

944

tax under chapter 220. This exemption does not apply to any tax

945

imposed by chapter 220 on interest, income, or profits on debt

946

obligations owned by corporations other than the Florida

947

Hurricane Catastrophe Fund Finance Corporation.

948

     b.  All bonds of the corporation shall be and constitute

949

legal investments without limitation for all public bodies of

950

this state; for all banks, trust companies, savings banks,

951

savings associations, savings and loan associations, and

952

investment companies; for all administrators, executors,

953

trustees, and other fiduciaries; for all insurance companies and

954

associations and other persons carrying on an insurance business;

955

and for all other persons who are now or may hereafter be

956

authorized to invest in bonds or other obligations of the state

957

and shall be and constitute eligible securities to be deposited

958

as collateral for the security of any state, county, municipal,

959

or other public funds. This sub-subparagraph shall be considered

960

as additional and supplemental authority and shall not be limited

961

without specific reference to this sub-subparagraph.

962

     6.  The corporation and its corporate existence shall

963

continue until terminated by law; however, no such law shall take

964

effect as long as the corporation has bonds outstanding unless

965

adequate provision has been made for the payment of such bonds

966

pursuant to the documents authorizing the issuance of such bonds.

967

Upon termination of the existence of the corporation, all of its

968

rights and properties in excess of its obligations shall pass to

969

and be vested in the state.

970

     (e)  Protection of bondholders.--

971

     1.  As long as the corporation has any bonds outstanding,

972

neither the fund nor the corporation shall have the authority to

973

file a voluntary petition under chapter 9 of the federal

974

Bankruptcy Code or such corresponding chapter or sections as may

975

be in effect, from time to time, and neither any public officer

976

nor any organization, entity, or other person shall authorize the

977

fund or the corporation to be or become a debtor under chapter 9

978

of the federal Bankruptcy Code or such corresponding chapter or

979

sections as may be in effect, from time to time, during any such

980

period.

981

     2.  The state hereby covenants with holders of bonds of the

982

corporation that the state will not limit or alter the denial of

983

authority under this paragraph or the rights under this section

984

vested in the fund or the corporation to fulfill the terms of any

985

agreements made with such bondholders or in any way impair the

986

rights and remedies of such bondholders as long as any such bonds

987

remain outstanding unless adequate provision has been made for

988

the payment of such bonds pursuant to the documents authorizing

989

the issuance of such bonds.

990

     3.  Notwithstanding any other provision of law, any pledge

991

of or other security interest in revenue, money, accounts,

992

contract rights, general intangibles, or other personal property

993

made or created by the fund or the corporation shall be valid,

994

binding, and perfected from the time such pledge is made or other

995

security interest attaches without any physical delivery of the

996

collateral or further act and the lien of any such pledge or

997

other security interest shall be valid, binding, and perfected

998

against all parties having claims of any kind in tort, contract,

999

or otherwise against the fund or the corporation irrespective of

1000

whether or not such parties have notice of such claims. No

1001

instrument by which such a pledge or security interest is created

1002

nor any financing statement need be recorded or filed.

1003

     (8)(7) ADDITIONAL POWERS AND DUTIES.--

1004

     (a) The board may authorize the division's procurement of

1005

procure reinsurance from reinsurers acceptable to the Office of

1006

Insurance Regulation for the purpose of maximizing the capacity

1007

of the fund and may enter into capital market transactions,

1008

including, but not limited to, industry loss warranties,

1009

catastrophe bonds, side-car arrangements, or financial contracts

1010

permissible for the State Board of Administration's board's usage

1011

under s. 215.47(10) and (11), consistent with prudent management

1012

of the fund.

1013

     (b) In addition to borrowing under subsection (7) (6), the

1014

board may also authorize the division to borrow from, or enter

1015

into other financing arrangements with, any market sources at

1016

prevailing interest rates.

1017

     (c)  Each fiscal year, the Legislature shall appropriate

1018

from the investment income of the Florida Hurricane Catastrophe

1019

Fund an amount no less than $10 million and no more than 35

1020

percent of the investment income based upon the most recent

1021

fiscal year-end audited financial statements for the purpose of

1022

providing funding for local governments, state agencies, public

1023

and private educational institutions, and nonprofit organizations

1024

to support programs intended to improve hurricane preparedness,

1025

reduce potential losses in the event of a hurricane, provide

1026

research into means to reduce such losses, educate or inform the

1027

public as to means to reduce hurricane losses, assist the public

1028

in determining the appropriateness of particular upgrades to

1029

structures or in the financing of such upgrades, or protect local

1030

infrastructure from potential damage from a hurricane. Moneys

1031

shall first be available for appropriation under this paragraph

1032

in fiscal year 1997-1998. Moneys in excess of the $10 million

1033

specified in this paragraph shall not be available for

1034

appropriation under this paragraph if the board State Board of

1035

Administration finds that an appropriation of investment income

1036

from the fund would jeopardize the actuarial soundness of the

1037

fund.

1038

     (d) The division board may allow insurers to comply with

1039

reporting requirements and reporting format requirements by using

1040

alternative methods of reporting if the proper administration of

1041

the fund is not thereby impaired and if the alternative methods

1042

produce data which is consistent with the purposes of this

1043

section.

1044

     (e)  In order to assure the equitable operation of the fund,

1045

the division board may impose a reasonable fee on an insurer to

1046

recover costs involved in reprocessing inaccurate, incomplete, or

1047

untimely exposure data submitted by the insurer.

1048

     (9)(8) ADVISORY COUNCIL.--The division State Board of

1049

Administration shall appoint a nine-member advisory council that

1050

consists of an actuary, a meteorologist, an engineer, a

1051

representative of insurers, a representative of insurance agents,

1052

a representative of reinsurers, and three consumers who shall

1053

also be representatives of other affected professions and

1054

industries, to provide the division board with information and

1055

advice in connection with its duties under this section. Members

1056

of the advisory council shall serve at the pleasure of the board

1057

and are eligible for per diem and travel expenses under s.

1058

112.061.

1059

     (10)(9) APPLICABILITY OF S. 19, ART. III OF THE STATE

1060

CONSTITUTION.--The Legislature finds that the Florida Hurricane

1061

Catastrophe Fund created by this section is a trust fund

1062

established for bond covenants, indentures, or resolutions within

1063

the meaning of s. 19(f)(3), Art. III of the State Constitution.

1064

     (11)(10) VIOLATIONS.--Any violation of this section or of

1065

rules adopted under this section constitutes a violation of the

1066

insurance code.

1067

     (12)(11) LEGAL PROCEEDINGS.--The division board is

1068

authorized to take any action necessary to enforce the rules, and

1069

the provisions and requirements of the reimbursement contract,

1070

required by and adopted pursuant to this section.

1071

     (13)(12) FEDERAL OR MULTISTATE CATASTROPHIC FUNDS.--Upon

1072

the creation of a federal or multistate catastrophic insurance or

1073

reinsurance program intended to serve purposes similar to the

1074

purposes of the fund created by this section, the division, upon

1075

approval by the board, State Board of Administration shall

1076

promptly make recommendations to the Legislature for coordination

1077

with the federal or multistate program, for termination of the

1078

fund, or for such other actions as the board finds appropriate in

1079

the circumstances.

1080

     (14)(13) REVERSION OF FUND ASSETS UPON TERMINATION.--The

1081

fund, the division, and the duties of the board under this

1082

section may be terminated only by law. Upon termination of the

1083

fund, all assets of the fund shall revert to the General Revenue

1084

Fund.

1085

     (15)(14) SEVERABILITY.--If any provision of this section or

1086

its application to any person or circumstance is held invalid,

1087

the invalidity does not affect other provisions or applications

1088

of the section which can be given effect without the invalid

1089

provision or application, and to this end the provisions of this

1090

section are declared severable.

1091

     (16)(15) COLLATERAL PROTECTION INSURANCE.--As used in this

1092

section and ss. 627.311 and 627.351, the term "collateral

1093

protection insurance" means commercial property insurance of

1094

which a creditor is the primary beneficiary and policyholder and

1095

which protects or covers an interest of the creditor arising out

1096

of a credit transaction secured by real or personal property.

1097

Initiation of such coverage is triggered by the mortgagor's

1098

failure to maintain insurance coverage as required by the

1099

mortgage or other lending document. Collateral protection

1100

insurance is not residential coverage.

1101

     (17)(16) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL

1102

COVERAGE OPTIONS.--

1103

     (a)  Findings and intent.--

1104

     1.  The Legislature finds that:

1105

     a.  Because of temporary disruptions in the market for

1106

catastrophic reinsurance, many property insurers were unable to

1107

procure reinsurance for the 2006 hurricane season with an

1108

attachment point below the insurers' respective Florida Hurricane

1109

Catastrophe Fund attachment points, were unable to procure

1110

sufficient amounts of such reinsurance, or were able to procure

1111

such reinsurance only by incurring substantially higher costs

1112

than in prior years.

1113

     b.  The reinsurance market problems were responsible, at

1114

least in part, for substantial premium increases to many

1115

consumers and increases in the number of policies issued by the

1116

Citizens Property Insurance Corporation.

1117

     c.  It is likely that the reinsurance market disruptions

1118

will not significantly abate prior to the 2007 hurricane season.

1119

     2.  It is the intent of the Legislature to create a

1120

temporary emergency program, applicable to the 2007, 2008, and

1121

2009 hurricane seasons, to address these market disruptions and

1122

enable insurers, at their option, to procure additional coverage

1123

from the Florida Hurricane Catastrophe Fund.

1124

     (b)  Applicability of other provisions of this section.--All

1125

provisions of this section and the rules adopted under this

1126

section apply to the program created by this subsection unless

1127

specifically superseded by this subsection.

1128

     (c)  Optional coverage.--For the contract year commencing

1129

June 1, 2007, and ending May 31, 2008, the contract year

1130

commencing June 1, 2008, and ending May 31, 2009, and the

1131

contract year commencing June 1, 2009, and ending May 31, 2010,

1132

the board shall offer for each of such years the optional

1133

coverage as provided in this subsection.

1134

     (d)  Additional definitions.--As used in this subsection,

1135

the term:

1136

     1.  "TEACO options" means the temporary emergency additional

1137

coverage options created under this subsection.

1138

     2.  "TEACO insurer" means an insurer that has opted to

1139

obtain coverage under the TEACO options in addition to the

1140

coverage provided to the insurer under its reimbursement

1141

contract.

1142

     3.  "TEACO reimbursement premium" means the premium charged

1143

by the fund for coverage provided under the TEACO options.

1144

     4.  "TEACO retention" means the amount of losses below which

1145

a TEACO insurer is not entitled to reimbursement from the fund

1146

under the TEACO option selected. A TEACO insurer's retention

1147

options shall be calculated as follows:

1148

     a. The division board shall calculate and report to each

1149

TEACO insurer the TEACO retention multiples. There shall be three

1150

TEACO retention multiples for defining coverage. Each multiple

1151

shall be calculated by dividing $3 billion, $4 billion, or $5

1152

billion by the total estimated mandatory FHCF reimbursement

1153

premium assuming all insurers selected the 90-percent coverage

1154

level.

1155

     b.  The TEACO retention multiples as determined under sub-

1156

subparagraph a. shall be adjusted to reflect the coverage level

1157

elected by the insurer. For insurers electing the 90-percent

1158

coverage level, the adjusted retention multiple is 100 percent of

1159

the amount determined under sub-subparagraph a. For insurers

1160

electing the 75-percent coverage level, the retention multiple is

1161

120 percent of the amount determined under sub-subparagraph a.

1162

For insurers electing the 45-percent coverage level, the adjusted

1163

retention multiple is 200 percent of the amount determined under

1164

sub-subparagraph a.

1165

     c.  An insurer shall determine its provisional TEACO

1166

retention by multiplying its estimated mandatory FHCF

1167

reimbursement premium by the applicable adjusted TEACO retention

1168

multiple and shall determine its actual TEACO retention by

1169

multiplying its actual mandatory FHCF reimbursement premium by

1170

the applicable adjusted TEACO retention multiple.

1171

     d.  For TEACO insurers who experience multiple covered

1172

events causing loss during the contract year, the insurer's full

1173

TEACO retention shall be applied to each of the covered events

1174

causing the two largest losses for that insurer. For other

1175

covered events resulting in losses, the TEACO option does not

1176

apply and the insurer's retention shall be one-third of the full

1177

retention as calculated under paragraph (2)(e).

1178

     5.  "TEACO addendum" means an addendum to the reimbursement

1179

contract reflecting the obligations of the fund and TEACO

1180

insurers under the program created by this subsection.

1181

     6.  "FHCF" means the Florida Hurricane Catastrophe Fund.

1182

     (e)  TEACO addendum.--

1183

     1.  The TEACO addendum shall provide for reimbursement of

1184

TEACO insurers for covered events occurring during the contract

1185

year, in exchange for the TEACO reimbursement premium paid into

1186

the fund under paragraph (f). Any insurer writing covered

1187

policies has the option of choosing to accept the TEACO addendum

1188

for any of the 3 contract years that the coverage is offered.

1189

     2.  The TEACO addendum shall contain a promise by the

1190

division board to reimburse the TEACO insurer for 45 percent, 75

1191

percent, or 90 percent of its losses from each covered event in

1192

excess of the insurer's TEACO retention, plus 5 percent of the

1193

reimbursed losses to cover loss adjustment expenses. The

1194

percentage shall be the same as the coverage level selected by

1195

the insurer under paragraph (5)(b) (4)(b).

1196

     3.  The TEACO addendum shall provide that reimbursement

1197

amounts shall not be reduced by reinsurance paid or payable to

1198

the insurer from other sources.

1199

     4.  The TEACO addendum shall also provide that the

1200

obligation of the division board with respect to all TEACO

1201

addenda shall not exceed an amount equal to two times the

1202

difference between the industry retention level calculated under

1203

paragraph (2)(e) and the $3 billion, $4 billion, or $5 billion

1204

industry TEACO retention level options actually selected, but in

1205

no event may the division's board's obligation exceed the actual

1206

claims-paying capacity of the fund plus the additional capacity

1207

created in paragraph (g). If the actual claims-paying capacity

1208

and the additional capacity created under paragraph (g) fall

1209

short of the division's board's obligations under the

1210

reimbursement contract, each insurer's share of the fund's

1211

capacity shall be prorated based on the premium an insurer pays

1212

for its mandatory reimbursement coverage and the premium paid for

1213

its optional TEACO coverage as each such premium bears to the

1214

total premiums paid to the fund times the available capacity.

1215

     5.  The priorities, schedule, and method of reimbursements

1216

under the TEACO addendum shall be the same as provided under

1217

subsection (5) (4).

1218

     6.  A TEACO insurer's maximum reimbursement for a single

1219

event shall be equal to the product of multiplying its mandatory

1220

FHCF premium by the difference between its FHCF retention

1221

multiple and its TEACO retention multiple under the TEACO option

1222

selected and by the coverage selected under paragraph (5)(b)

1223

(4)(b), plus an additional 5 percent for loss adjustment

1224

expenses. A TEACO insurer's maximum reimbursement under the TEACO

1225

option selected for a TEACO insurer's two largest events shall be

1226

twice its maximum reimbursement for a single event.

1227

     (f)  TEACO reimbursement premiums.--

1228

     1.  Each TEACO insurer shall pay to the fund, in the manner

1229

and at the time provided in the reimbursement contract for

1230

payment of reimbursement premiums, a TEACO reimbursement premium

1231

calculated as specified in this paragraph.

1232

     2.  The insurer's TEACO reimbursement premium associated

1233

with the $3 billion retention option shall be equal to 85 percent

1234

of a TEACO insurer's maximum reimbursement for a single event as

1235

calculated under subparagraph (e)6. The TEACO reimbursement

1236

premium associated with the $4 billion retention option shall be

1237

equal to 80 percent of a TEACO insurer's maximum reimbursement

1238

for a single event as calculated under subparagraph (e)6. The

1239

TEACO premium associated with the $5 billion retention option

1240

shall be equal to 75 percent of a TEACO insurer's maximum

1241

reimbursement for a single event as calculated under subparagraph

1242

(e)6.

1243

     (g)  Effect on claims-paying capacity of the fund.--For the

1244

contract term commencing June 1, 2007, the contract year

1245

commencing June 1, 2008, and the contract term beginning June 1,

1246

2009, the program created by this subsection shall increase the

1247

claims-paying capacity of the fund as provided in subparagraph

1248

(5)(c)1. (4)(c)1. by an amount equal to two times the difference

1249

between the industry retention level calculated under paragraph

1250

(2)(e) and the $3 billion industry TEACO retention level

1251

specified in sub-subparagraph (d)4.a. The additional capacity

1252

shall apply only to the additional coverage provided by the TEACO

1253

option and shall not otherwise affect any insurer's reimbursement

1254

from the fund.

1255

     (18)(17) TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.--

1256

     (a)  Findings and intent.--

1257

     1.  The Legislature finds that:

1258

     a.  Because of temporary disruptions in the market for

1259

catastrophic reinsurance, many property insurers were unable to

1260

procure sufficient amounts of reinsurance for the 2006 hurricane

1261

season or were able to procure such reinsurance only by incurring

1262

substantially higher costs than in prior years.

1263

     b.  The reinsurance market problems were responsible, at

1264

least in part, for substantial premium increases to many

1265

consumers and increases in the number of policies issued by

1266

Citizens Property Insurance Corporation.

1267

     c.  It is likely that the reinsurance market disruptions

1268

will not significantly abate prior to the 2008 2007 hurricane

1269

season.

1270

     2.  It is the intent of the Legislature to create options

1271

for insurers to purchase a temporary increased coverage limit

1272

above the statutorily determined limit in subparagraph (4)(c)1.,

1273

applicable for the 2007, 2008, and 2009 hurricane seasons, to

1274

address market disruptions and enable insurers, at their option,

1275

to procure additional coverage from the Florida Hurricane

1276

Catastrophe Fund.

1277

     (b)  Applicability of other provisions of this section.--All

1278

provisions of this section and the rules adopted under this

1279

section apply to the coverage created by this subsection unless

1280

specifically superseded by provisions in this subsection.

1281

     (c)  Optional coverage.--For the contract year commencing

1282

June 1, 2007, and ending May 31, 2008, the contract year

1283

commencing June 1, 2008, and ending May 31, 2009, and the

1284

contract year commencing June 1, 2009, and ending May 31, 2010,

1285

the board shall offer, for each of such years, the optional

1286

coverage as provided in this subsection.

1287

     (d)  Additional definitions.--As used in this subsection,

1288

the term:

1289

     1.  "FHCF" means Florida Hurricane Catastrophe Fund.

1290

     2.  "FHCF reimbursement premium" means the premium paid by

1291

an insurer for its coverage as a mandatory participant in the

1292

FHCF, but does not include additional premiums for optional

1293

coverages.

1294

     3.  "Payout multiple" means the number or multiple created

1295

by dividing the statutorily defined claims-paying capacity as

1296

determined in subparagraph (5)(c)1. (4)(c)1. by the aggregate

1297

reimbursement premiums paid by all insurers estimated or

1298

projected as of calendar year-end.

1299

     4.  "TICL" means the temporary increase in coverage limit.

1300

     5.  "TICL options" means the temporary increase in coverage

1301

options created under this subsection.

1302

     6.  "TICL insurer" means an insurer that has opted to obtain

1303

coverage under the TICL options addendum in addition to the

1304

coverage provided to the insurer under its FHCF reimbursement

1305

contract.

1306

     7.  "TICL reimbursement premium" means the premium charged

1307

by the fund for coverage provided under the TICL option.

1308

     8.  "TICL coverage multiple" means the coverage multiple

1309

when multiplied by an insurer's FHCF's reimbursement premium that

1310

defines the temporary increase in coverage limit.

1311

     9.  "TICL coverage" means the coverage for an insurer's

1312

losses above the insurer's statutorily determined claims-paying

1313

capacity based on the claims-paying limit in subparagraph

1314

(5)(c)1. (4)(c)1., which an insurer selects as its temporary

1315

increase in coverage from the fund under the TICL options

1316

selected. A TICL insurer's increased coverage limit options shall

1317

be calculated as follows:

1318

     a. The division board shall calculate and report to each

1319

TICL insurer the TICL coverage multiples based on 9 12 options

1320

for increasing the insurer's FHCF coverage limit. Each TICL

1321

coverage multiple shall be calculated by dividing $1 billion, $2

1322

billion, $3 billion, $4 billion, $5 billion, $6 billion, $7

1323

billion, $8 billion, and $9 billion, $10 billion, $11 billion, or

1324

$12 billion by the total estimated aggregate FHCF reimbursement

1325

premiums for the 2007-2008 contract year, the 2008-2009 contract

1326

year, and the 2009-2010 contract year.

1327

     b.  The TICL insurer's increased coverage shall be the FHCF

1328

reimbursement premium multiplied by the TICL coverage multiple

1329

for the TICL option selected. In order to determine an insurer's

1330

total limit of coverage, an insurer shall add its TICL coverage

1331

multiple to its payout multiple. The total shall represent a

1332

number that, when multiplied by an insurer's FHCF reimbursement

1333

premium for a given reimbursement contract year, defines an

1334

insurer's total limit of FHCF reimbursement coverage for that

1335

reimbursement contract year.

1336

     10.  "TICL options addendum" means an addendum to the

1337

reimbursement contract reflecting the obligations of the fund and

1338

insurers selecting an option to increase an insurer's FHCF

1339

coverage limit.

1340

     (e)  TICL options addendum.--

1341

     1.  The TICL options addendum shall provide for

1342

reimbursement of TICL insurers for covered events occurring

1343

between June 1, 2007, and May 31, 2008, and between June 1, 2008,

1344

and May 31, 2009, or between June 1, 2009, and May 31, 2010, in

1345

exchange for the TICL reimbursement premium paid into the fund

1346

under paragraph (f). Any insurer writing covered policies has the

1347

option of selecting an increased limit of coverage under the TICL

1348

options addendum and shall select such coverage at the time that

1349

it executes the FHCF reimbursement contract.

1350

     2.  The TICL addendum shall contain a promise by the board

1351

to reimburse the TICL insurer for 70 percent of the TICL coverage

1352

for the TICL option selected for the insurer's 45 percent, 75

1353

percent, or 90 percent of its losses from each covered event in

1354

excess of the insurer's retention, plus 5 percent of the

1355

reimbursed losses to cover loss adjustment expenses. The

1356

percentage shall be the same as the coverage level selected by

1357

the insurer under paragraph (4)(b).

1358

     3.  The TICL addendum shall provide that reimbursement

1359

amounts shall not be reduced by reinsurance paid or payable to

1360

the insurer from other sources.

1361

     4.  The priorities, schedule, and method of reimbursements

1362

under the TICL addendum shall be the same as provided under

1363

subsection (5) (4).

1364

     (f)  TICL reimbursement premiums.--Each TICL insurer shall

1365

pay to the fund, in the manner and at the time provided in the

1366

reimbursement contract for payment of reimbursement premiums, a

1367

TICL reimbursement premium determined as specified in subsection

1368

(5).

1369

     (g)  Effect on claims-paying capacity of the fund.--For the

1370

contract terms commencing June 1, 2007, June 1, 2008, and June 1,

1371

2009, the program created by this subsection shall increase the

1372

claims-paying capacity of the fund as provided in subparagraph

1373

(5)(c)1. (4)(c)1. by an amount not to exceed $9 $12 billion and

1374

shall depend on the TICL coverage options selected and the number

1375

of insurers that select the TICL optional coverage. The

1376

additional capacity shall apply only to the additional coverage

1377

provided under the TICL options and shall not otherwise affect

1378

any insurer's reimbursement from the fund if the insurer chooses

1379

not to select the temporary option to increase its limit of

1380

coverage under the FHCF.

1381

     (h)  Increasing the claims-paying capacity of the fund.--For

1382

the contract years commencing June 1, 2007, June 1, 2008, and

1383

June 1, 2009, the board may increase the claims-paying capacity

1384

of the fund as provided in paragraph (g) by an amount not to

1385

exceed $4 billion in four $1 billion options and shall depend on

1386

the TICL coverage options selected and the number of insurers

1387

that select the TICL optional coverage. Each insurer's TICL

1388

premium shall be calculated based upon the additional limit of

1389

increased coverage that the insurer selects. Such limit is

1390

determined by multiplying the TICL multiple associated with one

1391

of the four options times the insurer's FHCF reimbursement

1392

premium. The reimbursement premium associated with the additional

1393

coverage provided in this paragraph shall be determined as

1394

specified in subsection (6) (5).

1395

     Section 2.  Section 215.557, Florida Statutes, is amended to

1396

read:

1397

     215.557  Reports of insured values.--The reports of insured

1398

values under covered policies by zip code submitted to the

1399

Division of the Florida Hurricane Catastrophe Fund State Board of

1400

Administration pursuant to s. 215.555, as created by s. 1, ch.

1401

93-409, Laws of Florida, or similar legislation, are confidential

1402

and exempt from the provisions of s. 119.07(1) and s. 24(a), Art.

1403

I of the State Constitution.

1404

     Section 3.  Paragraph (h) of subsection (4) of section

1405

215.5586, Florida Statutes, is amended to read:

1406

     215.5586  My Safe Florida Home Program.--There is

1407

established within the Department of Financial Services the My

1408

Safe Florida Home Program. The department shall provide fiscal

1409

accountability, contract management, and strategic leadership for

1410

the program, consistent with this section. This section does not

1411

create an entitlement for property owners or obligate the state

1412

in any way to fund the inspection or retrofitting of residential

1413

property in this state. Implementation of this program is subject

1414

to annual legislative appropriations. It is the intent of the

1415

Legislature that the My Safe Florida Home Program provide

1416

inspections for at least 400,000 site-built, single-family,

1417

residential properties and provide grants to at least 35,000

1418

applicants before June 30, 2009. The program shall develop and

1419

implement a comprehensive and coordinated approach for hurricane

1420

damage mitigation that shall include the following:

1421

     (4)  ADVISORY COUNCIL.--There is created an advisory council

1422

to provide advice and assistance to the department regarding

1423

administration of the program. The advisory council shall consist

1424

of:

1425

     (h) The director senior officer of the Division of the

1426

Florida Hurricane Catastrophe Fund.

1427

1428

Members appointed under paragraphs (a)-(d) shall serve at the

1429

pleasure of the Financial Services Commission. Members appointed

1430

under paragraphs (e) and (f) shall serve at the pleasure of the

1431

appointing officer. All other members shall serve voting ex

1432

officio. Members of the advisory council shall serve without

1433

compensation but may receive reimbursement as provided in s.

1434

112.061 for per diem and travel expenses incurred in the

1435

performance of their official duties.

1436

     Section 4.  Subsection (1) of section 215.559, Florida

1437

Statutes, is amended to read:

1438

     215.559  Hurricane Loss Mitigation Program.--

1439

     (1)  There is created a Hurricane Loss Mitigation Program.

1440

The Legislature shall annually appropriate $10 million of the

1441

moneys authorized for appropriation under s. 215.555(8) s.

1442

215.555(7)(c) from the Florida Hurricane Catastrophe Fund to the

1443

Department of Community Affairs for the purposes set forth in

1444

this section.

1445

     Section 5.  Subsection (2) and paragraph (a) of subsection

1446

(3) of section 215.5595, Florida Statutes, are amended to read:

1447

     215.5595  Insurance Capital Build-Up Incentive Program.--

1448

     (2)  The purpose of this section is to provide surplus notes

1449

to new or existing authorized residential property insurers under

1450

the Insurance Capital Build-Up Incentive Program administered by

1451

the Division of the Florida Hurricane Catastrophe Fund of the

1452

State Board of Administration, under the following conditions:

1453

     (a)  The amount of the surplus note for any insurer or

1454

insurer group, other than an insurer writing only manufactured

1455

housing policies, may not exceed $25 million or 20 percent of the

1456

total amount of funds available under the program, whichever is

1457

greater. The amount of the surplus note for any insurer or

1458

insurer group writing residential property insurance covering

1459

only manufactured housing may not exceed $7 million.

1460

     (b)  The insurer must contribute an amount of new capital to

1461

its surplus which is at least equal to the amount of the surplus

1462

note and must apply to the board by July 1, 2006. If an insurer

1463

applies after July 1, 2006, but before June 1, 2007, the amount

1464

of the surplus note is limited to one-half of the new capital

1465

that the insurer contributes to its surplus, except that an

1466

insurer writing only manufactured housing policies is eligible to

1467

receive a surplus note of up to $7 million. For purposes of this

1468

section, new capital must be in the form of cash or cash

1469

equivalents as specified in s. 625.012(1).

1470

     (c)  The insurer's surplus, new capital, and the surplus

1471

note must total at least $50 million, except for insurers writing

1472

residential property insurance covering only manufactured

1473

housing. The insurer's surplus, new capital, and the surplus note

1474

must total at least $14 million for insurers writing only

1475

residential property insurance covering manufactured housing

1476

policies as provided in paragraph (a).

1477

     (d)  The insurer must commit to meeting a minimum writing

1478

ratio of net written premium to surplus of at least 2:1 for the

1479

term of the surplus note, which shall be determined by the Office

1480

of Insurance Regulation and certified quarterly to the board. For

1481

this purpose, the term "net written premium" means net written

1482

premium for residential property insurance in Florida, including

1483

the peril of wind, and "surplus" refers to the entire surplus of

1484

the insurer. If the required ratio is not maintained during the

1485

term of the surplus note, the board may increase the interest

1486

rate, accelerate the repayment of interest and principal, or

1487

shorten the term of the surplus note, subject to approval by the

1488

Commissioner of Insurance of payments by the insurer of principal

1489

and interest as provided in paragraph (f).

1490

     (e)  If the requirements of this section are met, the board

1491

may approve an application by an insurer for a surplus note,

1492

unless the board determines that the financial condition of the

1493

insurer and its business plan for writing residential property

1494

insurance in Florida places an unreasonably high level of

1495

financial risk to the state of nonpayment in full of the interest

1496

and principal. The board shall consult with the Office of

1497

Insurance Regulation and may contract with independent financial

1498

and insurance consultants in making this determination.

1499

     (f)  The surplus note must be repayable to the state with a

1500

term of 20 years. The surplus note shall accrue interest on the

1501

unpaid principal balance at a rate equivalent to the 10-year U.S.

1502

Treasury Bond rate, require the payment only of interest during

1503

the first 3 years, and include such other terms as approved by

1504

the board. Payment of principal or interest by the insurer on the

1505

surplus note must be approved by the Commissioner of Insurance,

1506

who shall approve such payment unless the commissioner determines

1507

that such payment will substantially impair the financial

1508

condition of the insurer. If such a determination is made, the

1509

commissioner shall approve such payment that will not

1510

substantially impair the financial condition of the insurer.

1511

     (g)  The total amount of funds available for the program is

1512

limited to the amount appropriated by the Legislature for this

1513

purpose. If the amount of surplus notes requested by insurers

1514

exceeds the amount of funds available, the board may prioritize

1515

insurers that are eligible and approved, with priority for

1516

funding given to insurers writing only manufactured housing

1517

policies, regardless of the date of application, based on the

1518

financial strength of the insurer, the viability of its proposed

1519

business plan for writing additional residential property

1520

insurance in the state, and the effect on competition in the

1521

residential property insurance market. Between insurers writing

1522

residential property insurance covering manufactured housing,

1523

priority shall be given to the insurer writing the highest

1524

percentage of its policies covering manufactured housing.

1525

     (h)  The board may allocate portions of the funds available

1526

for the program and establish dates for insurers to apply for

1527

surplus notes from such allocation which are earlier than the

1528

dates established in paragraph (b).

1529

     (i)  Notwithstanding paragraph (d), a newly formed

1530

manufactured housing insurer that is eligible for a surplus note

1531

under this section shall meet the premium to surplus ratio

1532

provisions of s. 624.4095.

1533

     (j)  As used in this section, "an insurer writing only

1534

manufactured housing policies" includes:

1535

     1.  A Florida domiciled insurer that begins writing personal

1536

lines residential manufactured housing policies in Florida after

1537

March 1, 2007, and that removes a minimum of 50,000 policies from

1538

Citizens Property Insurance Corporation without accepting a

1539

bonus, provided at least 25 percent of its policies cover

1540

manufactured housing. Such an insurer may count any funds above

1541

the minimum capital and surplus requirement that were contributed

1542

into the insurer after March 1, 2007, as new capital under this

1543

section.

1544

     2.  A Florida domiciled insurer that writes at least 40

1545

percent of its policies covering manufactured housing in Florida.

1546

     (3)  As used in this section, the term:

1547

     (a) "Board" means the Division of the Florida Hurricane

1548

Catastrophe Fund of the State Board of Administration.

1549

     Section 6.  Paragraph (c) of subsection (1), paragraphs (a),

1550

(b), (d), (f), and (g) of subsection (2), and paragraph (b) of

1551

subsection (3) of section 627.0628, Florida Statutes, are amended

1552

to read:

1553

     627.0628  Florida Commission on Hurricane Loss Projection

1554

Methodology; public records exemption; public meetings

1555

exemption.--

1556

     (1)  LEGISLATIVE FINDINGS AND INTENT.--

1557

     (c)  It is the intent of the Legislature to create the

1558

Florida Commission on Hurricane Loss Projection Methodology as a

1559

panel of experts to provide the most actuarially sophisticated

1560

guidelines and standards for projection of hurricane losses

1561

possible, given the current state of actuarial science. It is the

1562

further intent of the Legislature that such standards and

1563

guidelines must be used by the Division of the Florida Hurricane

1564

Catastrophe Fund of the State Board of Administration in

1565

developing reimbursement premium rates for the Florida Hurricane

1566

Catastrophe Fund, and, subject to paragraph (3)(c), may be used

1567

by insurers in rate filings under s. 627.062 unless the way in

1568

which such standards and guidelines were applied by the insurer

1569

was erroneous, as shown by a preponderance of the evidence.

1570

     (2)  COMMISSION CREATED.--

1571

     (a)  There is created the Florida Commission on Hurricane

1572

Loss Projection Methodology, which is assigned to the Division of

1573

the Florida Hurricane Catastrophe Fund of the State Board of

1574

Administration. For the purposes of this section, the term

1575

"commission" means the Florida Commission on Hurricane Loss

1576

Projection Methodology. The commission shall be administratively

1577

housed within the State Board of Administration, but it shall

1578

independently exercise the powers and duties specified in this

1579

section.

1580

     (b)  The commission shall consist of the following 11

1581

members:

1582

     1.  The insurance consumer advocate.

1583

     2. The director of the Division of the Florida Hurricane

1584

Catastrophe Fund senior employee of the State Board of

1585

Administration responsible for operations of the Florida

1586

Hurricane Catastrophe Fund.

1587

     3.  The Executive Director of the Citizens Property

1588

Insurance Corporation.

1589

     4.  The Director of the Division of Emergency Management of

1590

the Department of Community Affairs.

1591

     5.  The actuary member of the Florida Hurricane Catastrophe

1592

Fund Advisory Council.

1593

     6.  An employee of the office who is an actuary responsible

1594

for property insurance rate filings and who is appointed by the

1595

director of the office.

1596

     7.  Five members appointed by the Chief Financial Officer,

1597

as follows:

1598

     a.  An actuary who is employed full time by a property and

1599

casualty insurer which was responsible for at least 1 percent of

1600

the aggregate statewide direct written premium for homeowner's

1601

insurance in the calendar year preceding the member's appointment

1602

to the commission.

1603

     b.  An expert in insurance finance who is a full-time member

1604

of the faculty of the State University System and who has a

1605

background in actuarial science.

1606

     c.  An expert in statistics who is a full-time member of the

1607

faculty of the State University System and who has a background

1608

in insurance.

1609

     d.  An expert in computer system design who is a full-time

1610

member of the faculty of the State University System.

1611

     e.  An expert in meteorology who is a full-time member of

1612

the faculty of the State University System and who specializes in

1613

hurricanes.

1614

     (d) The board of the Division of the Florida Hurricane

1615

Catastrophe Fund of the State Board of Administration shall

1616

annually appoint one of the members of the commission to serve as

1617

chair.

1618

     (f) The Division of the Florida Hurricane Catastrophe Fund

1619

of the State Board of Administration shall, as a cost of

1620

administration of the Florida Hurricane Catastrophe Fund, provide

1621

for travel, expenses, and staff support for the commission.

1622

     (g)  There shall be no liability on the part of, and no

1623

cause of action of any nature shall arise against, any member of

1624

the commission, any member of the State Board of Administration,

1625

or any employee of the Division of the Florida Hurricane

1626

Catastrophe Fund of the State Board of Administration for any

1627

action taken in the performance of their duties under this

1628

section. In addition, the commission may, in writing, waive any

1629

potential cause of action for negligence of a consultant,

1630

contractor, or contract employee engaged to assist the

1631

commission.

1632

     (3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--

1633

     (b)  In establishing reimbursement premiums for the Florida

1634

Hurricane Catastrophe Fund, the Division of the Florida Hurricane

1635

Catastrophe Fund State Board of Administration must, to the

1636

extent feasible, employ actuarial methods, principles, standards,

1637

models, or output ranges found by the commission to be accurate

1638

or reliable.

1639

     Section 7.  This act shall take effect July 1, 2008.